LIP Invest Releases Market Report “Logistics Real Estate Germany” for Q1 2022

LIP Invest, a leading provider of real estate special funds for institutional investors in the asset class of logistics real estate in Germany, publishes its quarterly market report “LIP UP TO DATE – Logistics Real Estate Germany” detailing current developments in the highly sought-after asset class of logistics real estate. In addition to a review of the first quarter of 2022, the report also provides an outlook on the development of the investment market for the second quarter of 2022.

(Munich) Logistics real estate has solidified its second place among the asset classes of the commercial real estate market in the first three months of the year. With a strong start to the investment market and a persistently high demand for space, the logistics real estate market continues its upward trajectory unabated.

Furthermore, the war in Ukraine has had noticeable effects on supply routes. The trains along the New Silk Road had established themselves in recent years as an alternative to air and sea freight. Traffic on the routes through Russia has now significantly decreased. The southern corridor through Kazakhstan and Turkey is increasingly being used as an alternative connection. Overall, work is underway to expand further routes along the New Silk Road.

In the logistics real estate sector, the impacts are being felt in the area of new constructions: “In the past, the industry benefited from well-calculable construction costs and predictable timelines. The stable prices could be passed on from general contractors to project developers and ultimately to the end investor. Due to the current situation, construction costs are changing very quickly, making planning more difficult. General contractors are increasingly moving towards agreeing on sliding clauses and adjusting the conditions in line with the construction cost index. This sometimes leads to rents for new constructions being linked to the construction cost index,” explains Natalie Weber, authorized signatory and Head of Fund Management at LIP Invest.

For the first time since the economic crisis of 2008/2009, yields are on the rise: In the first quarter of 2022, gross initial yields recorded an increase to 3.50%. The reason for this is a changed market environment due to sharply rising interest rates and the war in Ukraine. LIP Invest also expects a slight upward trend for the remainder of the year, as the actual impacts on the capital market will only be felt with a certain delay in the real estate market.

Investment Market

With a transaction volume of 4.2 billion euros, the investment market started the year 2022 with a strong signal. The sustained high interest of investors in logistics real estate investments is reflected in the again high sales figures with individual deals, although portfolio transactions and corporate acquisitions made up the majority of investments in the first quarter. This includes, for example, the acquisition of the majority shares in VIB Vermögen with a volume of over 500 million euros.

LIP continuously analyzes developments in the German logistics real estate market. This includes monitoring the supply situation. The start of the year is tending to be somewhat quieter, so LIP offered properties with a volume of around 600 million euros for sale in the first quarter. Logistics service providers were again the predominant user group of the logistics real estate available on the market.

Nearly three-quarters of the properties offered in the first quarter were new constructions. The new construction activity remains high at 1.2 million square meters. The share of new constructions in the total space turnover is about 60 percent and exceeds the previous year’s period by about 18 percent. In February, for example, the groundbreaking for the first three of ten planned logistics properties in the Louis-Krages-Logistikpark Bremen took place. Project developer Mileway plans more than 100,000 square meters of logistics space here.

Space Turnover

The space turnover stands at 2.0 million square meters sold, significantly above the long-term average. The rental of approximately 62,000 square meters to Airbus subsidiary Satair on the ground floor of the two-story Four Parx logistics property “Mach 2” is among the largest deals in the first quarter. In light of the war in Ukraine and ongoing delivery difficulties, the demand for logistics space is expected to remain high throughout the year.

Outlook

Can green roofs bind CO2 and thus make an effective contribution to climate protection? This question is being investigated by a research group at the Technical University of Braunschweig with an extensive measurement study on the 71,000 square meter roof of our logistics property in Obernburg. This offers new research opportunities for the scientific working group. The measurement study is initially planned for a period of one year to capture seasonal fluctuations due to weather and vegetation cycles. A positive result from the study would further underscore the importance of green roofs on logistics properties as an effective contribution to climate protection.

The market report is available for free download to all interested parties at https://www.lip-invest.com/de/research-forschung#forschung.

Image: © LIP Invest GmbH